Peugeot buys Opel: How does a German automaker become French?

Switzerland - As the automotive industry goes about its latest show and tell meet in the neutrality of Switzerland, at the Geneva motor show, the European car industry’s greatest change in decades has been inked. 

The PSA Group (effectively Peugeot/Citroen) has taken ownership of Opel, from General Motors – the American owners who are nothing if not terrifically relieved to finally be done with Opel after 86 years of underachievement. 

‘Wait, 86 years of American owned Opel?’ Indeed. 

Indifference towards the non-German, German car brand

Opel’s always been the outcast of Germany’s crushingly accomplished auto industry. The resentment towards it from Audi, BMW, Mercedes, VW and Porsche cannot be underestimated; even less so the collective negotiating power to keep Opel from accessing the best graduates or components and technologies from German suppliers. 

Opel’s destiny has always, tragically, been underachievement and ultimately: failure. For nearly nine decades General Motors has had little idea what to do with these typically brilliant German engineers on its payroll, seven time zones away. Whilst all other German car companies have flourished, Opel’s stagnated. The deal it had done with General Motors at the start of the Great Depression, a short-term survival tactic, was its long-term undoing.

READ: Peugeot takeover - Opel in crisis for decades

If you were an investor in the automotive industry, a German brand would be your indisputable blue-chip stock choice. Not so with Opel, it has always been greatly unloved, despite showing – time and again – promises of brilliance. Which is hardly surprising, as it’s staffed by Germans, the calibre of which dominate the research, development, production and marketing of all things automotive.

Too little, too late

How did General Motors get it all so wrong? Success in the post-World War Two era came too easily for General Motors with lazily engineered, oversised American land yachts. 

By the time it realised Opel had an ability to style and deliver cars of a distinctly European design, worth their premium and powered by those smaller engines required during the oil crisis shocks of the 1970s, it was too late. The Japanese had arrived, with small engine capacity coupes and sedans already. 

Despite being underfunded and ignored, Opel did occasionally do remarkable things. It’s Cosworth 16-valve cylinder head performance cars of the late 1980s and early 1990s remain legendary. For South Africans especially, who’ll remember in awe how Boss and Superboss Kadetts had the claim on many BMWs of the era. 

READ: Peugeot-Citroen buys Opel-Vauxhall for $1.3-billion

Today we venerate M5, E63 and RS6. Yet the original German (well, perhaps British) performance four-door was the Lotus Carlton, which was built on an Opel platform. Were there ever prettier touring cars than those DTM Calibras? Can we ever forget the temperamental but beautiful South African modified saloon racing Calibra, in its silver finish? Those mad turbocharged 200ts cars of the mid 1990s? The Opel Speedster, a reliable Lotus. 

It’s an engineering heritage not without moments of true inspiration. You look upon the current portfolio from Opel and these are attractively styled, thoroughly capable cars. Germans cars. That nobody’s interested in. It’s inexplicable in 2017: a German car company producing cars which are not at all average but startlingly unsuccessful. 

Problematically they are also not terribly expensive cars. Commanding high prices which carry substantial margins, unlike other Germans brands. And as such, the business has suffered. 

French revenge?

The future? Crisis. And I mean that literally. PSA now becomes Europe’s second largest car company after VW, eclipsing in size Mercedes-Benz and BMW. But numbers are nothing if they are not profitable – and that’s the issue. 

Opel and Peugeot/Citroen compete with each other, selling cars of very similar size, price and configuration. At best, there might be some production efficiency in bulk-parts sourcing, at worst: cannibalisation of market share. 

It’s a very unlikely success story waiting to happen, a German car company flourishing under French ownership. That said, PSA could hardly do worse than what General Motors did in its near ninety years with Opel. 

Consequences for South Africa? Opel’s heritage is more entrenched here than many other markets. There’s a definite business case for future Opel success locally, provided the structures to enable that are in place. General Motors is a much larger, more established business in South Africa than Peugeot is, and with Citroen having left, there’s room in the French organisation’s local capacity for Opel. Will the public be ready for possible Peugeot/Opel joint venture dealerships? We wonder.

Things are far worse for Vauxhall, in the United Kingdom, where the sibling badge-entity is sure to die, due to Brexit making the production facilities untenable for new French management, which is domiciled in the EU. 

For Opel, its most pressing issue in immediacy of this PSA ownership deal is retaining talent. There are great engineers at Russelsheim, but they’ve been underutilised for decades and their ambitions frustrated. In 2011, Frank Weber, the man who had managed Opel’s electrisation project to a level of advancement threatening all other German rivals, was poached by BMW for its i-Car division. Opel must prevent an immediate abandoning of the company by its brightest, if it is to have any future at all.

For a German mechanical engineering company with a history tracing all the way back to 1862, when Adam Opel founded it, a destiny controlled from across the Rhine is perhaps better than one managed from across the Atlantic.

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